Google AI Comeback? Time to Invest in Google Stock?

Google AI Comeback - Invest in Google Stock

After OpenAI released ChatGPTv3, the world was astonished by what AI could do. Microsoft invested $10 billion into OpenAI and integrated ChatGPT into their Bing search engine and productivity suites. Not long after, Google followed suit by introducing their version of an AI chatbot called Bard AI. Unfortunately, their demo of Bard AI contained a fundamental factual error, causing investors to get spooked. Google’s share price plummeted immediately after the announcement. Investors believed that Google may have lost the AI race to Microsoft. It is an existential crisis for Google’s core business.

Fast forward to the 2023 Google I/O event. Google did various demos on how they have integrated AI into their products, including their search engine and productivity suites. So far, it looks impressive. And boom! They are back in the AI race. Investors seem to agree, and Google’s share price has increased since the announcement. Is it time to invest in Google stock?


Google AI Product Integration

Google has invested in AI for a long time. It’s just mostly not visible to the end users. That is why when OpenAI and Microsoft started to push AI to the end consumers, Google was able to respond quickly. In the latest Google I/O event, Google demonstrated the various AI integration into their core products. You can see the summary here:

What do you think? We think it is pretty impressive. Google did flex its AI muscle.


Google’s Competitive Moat

Their chatbot product, Bard AI, has one significant advantage over ChatGPT: It has real-time access to the internet with Google search data as its dataset.

In our view, one of Google’s competitive moats is its dominance in the search business. They controlled 90% of the global search market.

Search Engine Market Share Worldwide

Chart of Search Engine Market Share Worldwide
Google’s search engine market share is so dominant at more than 90%. Its closest competitor, Bing, only commands 2.79%. (Source:

Market share translates to more data. Do you know what makes one AI model more ‘intelligent’ than the other? The answer is the parameter and the dataset it is being trained on. With Google arguably having the most extensive knowledge graph on the internet and the ins and outs of user search behavior, they should have enough data to tweak Bard AI training parameters effectively. Additionally, by having access to arguably the most comprehensive search results globally, we can expect Bard AI to be reasonably competitive compared to its competitors. You can even say it has an unfair advantage. This is why we love businesses that have massive competitive moats in their industry.


Is It a Good Time to Invest in Google Stock?

Do you think Google is back in the AI race again? Should investors invest in Google stock? The answer depends on your conviction and your investing objective.

As we covered previously in the AI revolution article, if you don’t believe AI will be one of the key growth drivers in the future, there is little reason to be bullish on these companies investing heavily in AI. However, if you believe AI will become a fundamental part of our future, today could be an exciting time as the AI race has just started. Many of these companies just started investing heavily in AI this year. Even if you have a strong conviction in AI, we would still suggest that you exercise prudence when investing. As rational investors, we do not invest based on hype but on the fundamentals of the businesses.

Revenue Impact?

With Google integrating generative search into its search engine, it is still unclear what the implication will be to its search ads revenue. A drop in search ads revenue may cause a significant reduction in Google’s overall revenue because the search ads segment contributes more than half of Google’s total revenue.

Google 2022 revenue breakdown
Google 2022 revenue breakdown by business segment. Google Search Ads segment contributes more than half of Google’s total revenue.


Let’s look at the valuation to understand where Google’s stock is. For stocks like Google, we can use the simple P/E ratio to provide a rough gauge of the stock valuation.

Google P/E Ratio Historical Chart
Google’s P/E ratio over the past ten years.

The average Google’s P/E ratio over the past ten years is 29.28. The current P/E ratio of 26.26 seems slightly below the historical average. Looking good? Let’s compare it to their closest AI competitor, Microsoft. Microsoft currently has a P/E ratio of 33.44, much higher than Google’s P/E ratio. However, please note that Microsoft has a different business model than Google. So although they are head-to-head in the AI race, maybe that’s not a fair comparison.

How about their main competitor in the advertising industry, Facebook? Facebook currently has a P/E ratio of 28.90, which is also slightly higher than Google’s.

So far, the valuation looks good. You can use other valuation methods to confirm this assessment, such as discounted cash-flow model, which is suitable for profitable cash-flow-generating businesses like Google. If you think Google has more room to grow, you may consider adding Google to your portfolio to have exposure to the emerging AI sector.

Technical Analysis

How about in terms of technical analysis (TA)? TA should not be too much of a consideration for long-term investors, but it still doesn’t hurt to look into it. Here is Google’s chart over the past three years:

Google share price TA - Time to Invest in Google Stock?
Google share price three-year chart

After rising during the COVID pandemic boom, Google’s share declined and entered a consolidation period last year (orange channel). However, after making a local low late last year, the price trend seems to have changed (see the blue channel). The price movement has been creating a higher low and higher high, indicating that a new trend may have formed. After the recent Google I/O announcement, the price spiked above the blue ascending channel showing a short-term bullish momentum.

As with all markets, the price doesn’t go up in a straight line. There are waves up and down along the way. After the recent massive spike, there is a chance a short-term pullback may be coming. A pullback may be a decent opportunity to invest in Google stock.



After the market punished Google’s stock due to the ‘rushed-out’ AI demo earlier this year, the recent Google AI announcement was definitely more polished, making investors excited again with the prospect of Google dominating the AI landscape. As investors, if you believe in AI and that Google will be one of the major players, today can be the time to consider researching more about Google and how it can play a part in your portfolio. As always, do your research and exercise prudence when investing. Happy Investing!

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Disclaimer: The information provided here is not intended to be and does not constitute financial advice, investment advice, trading advice, or any other advice or recommendation of any sort.

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David Ang

About David Ang

A long-term investor with a portfolio across the United States and Asian equities, REITs, commodities, and fixed incomes. After over a decade of hands-on investing (and making countless mistakes), I'm excited to use this platform to share what I've learned over the years. And let's continue to learn together. Writing about macro economy, equities, personal finance, web3. Follow me on Twitter: @danggaku